Obama says budget deal closer than ever

Republicans would cut $12 billion in one-week stopgap plan

WASHINGTON (MarketWatch) — A budget deal that would keep the government running past Friday is closer than ever, President Barack Obama said Tuesday, as top congressional Republicans and Democrats planned another round of negotiations aimed at hammering out a spending plan for the next six months.

“We are now closer than we have ever been to getting an agreement. There’s no reason why we should not get an agreement,” Obama said in a surprise appearance at Tuesday’s regular White House briefing. He said that it would be “inexcusable” not to fund the government and added that a new stopgap bill keeping the government running past Friday would be acceptable if Republicans and Democrats first agree on a bill funding the government through Sept. 30.

“That’s something we could support,” Obama said. He said he’d keep calling leaders back to the White House for meetings for as long as it took to head off a shutdown. “If they can’t sort it out, I want them back here tomorrow,” Obama told reporters.

Government operations are funded through Friday and would partially halt Saturday without a new budget agreement.

House Speaker John Boehner said Republicans would keep fighting for the biggest spending cuts possible and that conversations would continue with Democrats. House Republicans have prepared a one-week stopgap measure to give negotiators more time to reach a long-term agreement.

“While there was a good discussion, no agreement was reached,” Boehner said earlier Tuesday, after meeting with Obama at the White House.

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Boehner said House Republicans want to vote this week on a bill to fund the government for the rest of the 2011 fiscal year, which ends Sept. 30. But he said the new one-week stopgap measure, which cuts $12 billion in spending, is a “potential third option.”

Battle begins over 2012 budget

Shortly before Obama’s meeting with leaders over the 2011 budget, House Republicans opened a new battle in Washington’s budget wars by proposing a budget for fiscal 2012 that would slash government spending by $6.2 trillion over 10 years, cut the top corporate tax rate to 25%, and dramatically overhaul the Medicare program.

Republicans’ budget blueprint for fiscal 2012, released by House Budget Committee Chairman Paul Ryan of Wisconsin, would also scrap Obama’s health-care law, remake federal welfare programs and allow oil and gas companies to drill more freely. The plan assumes a U.S. unemployment rate of 2.8% in 2021 compared to 8.8% today, the conservative Heritage Foundation estimated.

The GOP budget lands in the middle of an intense debate about government spending and debt, and comes a day after Obama announced his 2012 re-election bid. By presenting a plan to lock in spending cuts, replace Obama’s health-care law and allow new Medicare beneficiaries to choose private plans, Republicans say they’re leading where the president has failed.

“This budget helps spur job creation today, stops spending money the government doesn’t have, and lifts the crushing burden of debt,” states the plan, which the GOP has dubbed “The Path to Prosperity.”

The plan is expected to pass the GOP-controlled House, but it is unlikely to garner much support in the Democratic-controlled Senate. That means that the plan will serve as a focus of debate just as both political parties gird for the 2012 election.

Democrats attacked the Ryan plan in a preview of the policy tugs-of-war to come.

“The American people won’t be fooled by your rhetoric, Mr. Chairman. The GOP budget eliminates guaranteed benefits for seniors under Medicare and slashes support for seniors, children, and Americans with disabilities on Medicaid,” said a statement from House Democratic Leader Nancy Pelosi’s office on Tuesday.

Ryan’s plans for Medicare and Medicaid are emerging as flash points. For people now 55 and older, there would be no change to Medicare. But beginning in 2022, newly retiring seniors would no longer have access to the government-run Medicare program. Instead, retirees would choose a privately run insurance plan from among a set of options provided.

Medicaid, meanwhile, would be converted into a block grant for states. Ryan has estimated that the Republicans’ budget would save $771 billion on Medicaid over the next 10 years.

Overall, the budget would spend $3.53 trillion, which is $179 billion less than Obama’s 2012 plan. The Republican blueprint also aims to balance the budget, excluding interest payments, by 2015.

Obama sent his $3.7 trillion fiscal 2012 budget to Congress in February, and Republicans immediately attacked the president’s plans for targeted spending in areas including renewable energy and infrastructure. Obama defended that spending even as his budget predicted a record $1.6 trillion budget deficit in 2011.

Republicans reclaimed the House in November’s elections, running on pledges to deeply cut government spending. But the party wasn’t able to fulfill its pledge to trim $100 billion from current levels, disappointing the tea-party movement and other conservatives.

Fiscal 2012 begins Oct. 1, so lawmakers and the White House have plenty of time to debate competing spending and tax proposals.

But Congress must soon turn its attention to the U.S. debt ceiling. The U.S. will hit the ceiling no later than May 16, Treasury Secretary Timothy Geithner said Monday. In a letter to congressional leaders, Geithner said that the Treasury could delay hitting the limit by using various tactics, but he warned that those measures would work only for about eight weeks.

Some lawmakers have said they won’t vote to raise the borrowing limit without a corresponding plan to rein in the U.S. budget deficit.

Robert
Schroeder

Robert Schroeder is the White House reporter for MarketWatch. Follow him on Twitter @mktwrobs.

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